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Tom Petty was right — the waiting really is the hardest part.
Image source: Getty Images
If you’re currently renting but ready to become a homeowner, I fully sympathize. That said, given how expensive it is both to become a homeowner and then maintain said home, it’s not a move to be rushed into or taken lightly. Remember, your costs don’t end after you find a mortgage lender, get approved, go through the buying process, and move into your home. You’ll be responsible for maintaining the house, paying property taxes and homeowners insurance bills, and more.
And since homeownership costs are even higher lately (thanks to higher home prices and higher mortgage rates — a true double whammy of expenses), it’s even more worthwhile to take the time to think and plan before jumping into buying a home.
Back in late 2021 and early 2022, my plan was to buy this year, but I have since rethought that plan. And while I’m disappointed, I know it’s the right move based on the housing market as well as my own finances. Here’s why it’s great to wait on buying, if you’re able to.
1. You can improve your credit
This first reason to wait on homeownership is a biggie. One of the best ways to save money on an eventual home purchase is to go in with your credit in the best shape possible. Why? The better your credit score, the lower the interest rate you’ll qualify for on a mortgage loan. You can also shop around for multiple quotes from different lenders to ensure you’re getting the best deal possible.
By waiting, you’re giving yourself the time to improve your credit score. This three-digit number has a major impact on your financial life, and thankfully, you can raise it in a few different ways. If you pay down debts, especially credit card debt, you’ll lower your credit utilization ratio (to improve your credit score, ideally you should only be using 30% or less of your available credit). Your payment history makes up 35% of your credit score, so if you’ve been a bit lax about making on-time payments on your debts, now is your chance to build better habits and watch your score improve.
You can also pull your credit report (available for free every week through the end of 2023) and comb through it for errors. If you find a mistake (such as a debt you paid off showing as delinquent, or even someone else’s credit information), you’re entitled to have it removed, which will boost your score.
2. You can save your down payment — and an emergency maintenance fund
In addition to a higher credit score, the other thing you’re going to want going into a home purchase is cash savings. While it isn’t an absolute requirement that you make a 20% down payment on a home, if you are able to do so, you will avoid being charged extra for private mortgage insurance (PMI) on a conventional loan or mortgage insurance premiums (MIP, confusingly) on an FHA loan. Plus, going in with a larger down payment means you’ll be borrowing less and therefore be less of a risk for your mortgage lender. This could even qualify you for a lower interest rate. As they say, you gotta spend money to make money.
In addition to having a down payment saved, you’ll need money for closing costs (usually amounting to 2% to 5% of the cost of your home). You might also want to have some cash savings to cover any expenses you incur on your new home soon after buying it. If you decide to repaint, for example, it’ll be nice to be able to pay those costs outright rather than going into debt to fund them. Do your future self a favor and avoid becoming flat broke after purchasing a home.
It’s also crucial to have an emergency maintenance fund saved up. Remember, when you sign (again and again and again) all that paperwork to officially close on your home, it’s your responsibility. If the roof caves in or the hot water heater explodes, it’s up to you to cover the cost of repairs and replacements. And even if a homeowners insurance policy covers some or all of your repair costs on certain home mishaps, you’ll still need to supply the cost of your deductible.
3. You can strike when the time is right
Finally, if you wait to buy a home, you can jump into the process when the time is right for you to save money. Not many people buy during the winter months, so you might find a deal (and less competition) if you do so. You could also position yourself to be ready to move forward on getting a mortgage pre-approval when rates drop.
Ultimately, hitting the brakes when you feel ready to buy a home can be disappointing. But with such a large expense, it’s a great move to give yourself every chance to succeed. Waiting — and taking actions like improving your credit and saving more money — can give you that.
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